Short On Time… Executive Summary
The executive summary is a bit longer today. The market continues to climb the wall of worry. Halfway through 3Q25 earnings season with 244 companies reporting. 83% of companies are beating and overall beats are +4.3%, which implies overall 12% EPS growth year over year. There are many sectors posting double digit growth, so this is not only an AI story but rather demonstrates US corporates and multinationals are able to generate strong earnings gains despite the largest tariff increases in US history. Recall many economists predicted US profit margins would collapse by 3Q25 due to tariff cost surges. So, onward and upward for now. Powell talked tough on rate cuts at last week’s meeting. However, the Fed is always posturing. Don’t pay attention to what they say, pay attention to what they do. And don’t buy for a minute that they’re missing any data because of the government shutdown. There are multitudes of private data vendors who do a better job than the government at compiling information. Truflation is one example. They measure 15 million data points in real time. By the way, they have inflation at 2.70% as of today.
On a personal note, you may have noticed there was no update last week. Normally I prepare these Monday mornings. Last Monday morning, Roxy, our family dog, wasn’t acting like herself. She was fine on Sunday and appeared fit and happy. Well, I took her into the vet Monday morning and received the worst news imaginable. She had lung cancer that had spread from another tumor we weren’t aware of near her heart. They said at this stage she had only days. Shocked would be an understatement. Well, by Tuesday evening she began laboring to breathe and we had to let her go. We didn’t want her to suffer. She was a rescue that we only had for 2 years. But, in those 2 years she captured our hearts and was a joy to be around and was a member of our family. To say that we love her is also an understatement. We took her on vacation with us as much as we could because we hated to leave her and our house just isn’t the same without her. Two years wasn’t enough, but we were blessed to have her and we would do it all over again. She was the sweetest soul one could meet.
Dogs provide unconditional love and companionship, and we are fortunate to have them. We could learn a lot from them. If you’re able, consider rescuing a dog or cat from a shelter. You may find you both end up being rescued.
The Week On Wall Street
Stocks rose last week as trade developments, positive Q3 corporate results, and momentum in megacap tech drove another rally, despite some cautious comments from the Fed. The Standard & Poor’s 500 Index gained 0.71 percent, while the tech-heavy Nasdaq Composite Index picked up 2.24 percent. The Dow Jones Industrial Average rose 0.75 percent. By contrast, the MSCI EAFE Index, which tracks developed overseas stock markets, fell 0.55 percent.
Stocks Up for Third Straight Week
Stocks rose over the first half of the week on news that Chinese and U.S. officials were working on a trade deal. Meanwhile, a rise in AI-related tech names lifted the broader market ahead of the Federal Open Market Committee (FOMC) meeting. All three major averages notched record closing highs for the first two days of the week, including the S&P 500 closing above 6800 for the first time. Stocks continued their rise Wednesday morning as the AI trade continued to fuel momentum. But markets wobbled following the FOMC’s decision to cut interest rates by a quarter percentage point. Chair Powell’s comments that the Fed may not adjust rates in December cut short the market's rally. Stocks bounced out of the gate on Friday, with the Nasdaq leading gains for all three major averages as several megacap tech companies rallied on upbeat Q3 results and other corporate news.
‘Not a Foregone Conclusion’
As widely expected, the Federal Reserve cut short-term interest rates by 0.25 percent. But as often happens for those trying to read the Fed tea leaves, it was the finer messaging points that moved the markets. Fed Chair Jerome Powell said in his post-meeting press conference that another rate adjustment in December was “not a foregone conclusion.” He added that Fed policy is “not on a pre-set course.” Part of that, he said, was due to the ongoing government shutdown and the resulting dearth of economic data—and the challenge in setting monetary policy without ongoing reports.
This Week: Key Economic Data
Monday: PMI Composite–Manufacturing. ISM Manufacturing. Construction Spending.* Auto Sales. Fed governor Lisa Cook speaks.
Tuesday: Trade Deficit.* Factory Orders. Job Openings.
Wednesday: ADP Employment Report. PMI Composite–Services. ISM Services.
Thursday: Weekly Jobless Claims.* Productivity.* Wholesale Inventories.* Federal Reserve Officials speak: New York Fed President Williams, Philadelphia Fed President Paulson, St. Louis Fed President Musalem.
Friday: Jobs Report.* Consumer Sentiment. Consumer Credit. Dallas Fed President Logan speaks.
This Week: Companies Reporting Earnings
Stay tuned...
